Stock Review

Bulls back in the ring as stocks likely to maintain positive atmosphere

During the week ended 26th October 2018 the benchmark Index of Pakistan Stock Exchange (PSX) closed at 40,556 points, up 5.5%WoW. The reversal in trend was prompted by the promise by Saudi Arabia to extend a bailout package for Pakistan, estimated around US$6 billion. It is likely to pave way for additional bilateral assistance from other friendly countries and ease pressure while negotiating a facility with the International Monetary Fund (IMF).

Key news flows moving the market included: 1) second visit of Prime Minister, Imran Khan to Saudi Arabia where US$6 billion assistance for Pakistan was negotiated and Khan also promised to mediate between Saudi Arabia and Yemen to end their ongoing conflict, 2) Finance Minister Asad Umar constituted a seven-member core group to formulate a Memorandum of Economic and Financial Policies for discussion with the IMF delegation for a meeting with the lender of last resort. The delegation is scheduled to visit Islamabad from 7 to 20th November for discussions with Pakistani authorities, 3) after deliberating in at least eight meetings, the Government of Pakistan (GoP) approved Rs1.20/KwH average increase in base tariff at a meeting of the ECC of the cabinet with a cumulative impact of about Rs 124 billion, 4) Imran Khan promised visit to China from 2-5th November at the invitation of the Chinese leadership, where a number of agreements are likely to be signed and 5) global oil prices dropped more than one % on Friday, heading for a third weekly loss after Saudi Arabia warned of oversupply.

Average daily traded volumes jumped more than 51% WoW to slightly more than 301 million. Volume leaders being: BOP, KEL, LOTCHEM, and TRG and major gainers included: KAPCO, GWLC, EFOODS, and NML. Positive outcome Khan’s second visit to Saudi Arabia has created hope forfurther assistance from Malaysia and China. While global stock and commodity markets are likely to remain under pressure, continuation of earnings announcements is expected to keepdaily trading volumes lofty.

Pakistan’s current account deficit for September 2018 was recorded at US$952 million as compared to US$592 million in August 2018, up 61%MoM, where sequential weakness was evident due to the seasonal slowdown in remittance inflows, down by 29%MoM to US$1.45 billion. Encouragingly, trade deficit contracted 15%MoM during the month, where both imports and exports witnessed double-digit declines of 15%MoM and 14%MoM, respectively.

Analysts continue to expect that the Government of Pakistan (GoP) to negotiate a package with IMF, despite certain quarters indicating otherwise. In this regard, analysts continue to warn that inflows from friendly countries may not be sufficient to bridge the large net financing gaps. However, any materialization of the bilateral and multilateral financial assistance is likely to improve investors’ sentiment and offer further impetus to the on-going relief rally at the bourse.

Market Overview

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